"The asset management industry in India will expand in the years to come... There'll be enough opportunity for mutual funds to grow in India in the next 12 - 18 months. Opportunity to grow will play out in the years to come," said Mr Gray in a select press meet post the Axis - Schroders deal last week.

Britain's largest asset management company Schroders acquired 25% stake in the Axis Bank-promoted Axis Mutual Fund for an undisclosed amount. The British firm, which manages $ 291 billion worldwide, had applied to the Securities and Exchange Board of India (SEBI) in April 2008 to start a mutual fund business in India, but did not secure a license till last year. It was then Schroders decided to partner with a local player.

"Axis was looking for an international partner... we also realised the need for a local partner to operate in a country like India. India is a complex market in terms of distribution. A partner like Axis Mutual will help us make inroads," Mr Gray said. The deal will help the Indian fund house to access Schroders' global distribution network and advise overseas funds invested in Indian securities.

Axis Mutual, which started operations in 2009, has equity assets worth Rs 640 crore. Axis Mutual Fund's total assets under management (AUM) stood at Rs 8,815 crore as on March 31. Tough business conditions are prompting Indian fund houses to strike partnership deals with stronger foreign institutions that can bring in advisory and investment mandates.

While most fund houses have failed to beef their asset bases, the industry lost close to eight lakh investor folios last year as a result of lacklustre equities markets and low distributor support. Abundance of high-yielding debt instruments also prompted investors to redeem their money from mutual funds.

"If you take a macro view, mutual funds business across Asia is going through a tough phase. Retail investors are staying away from equity fund products in many countries across the continent.

India is not the only country where mutual funds are having a tough time," Mr Gray said. Schroders intends to bring its line of investment products to India over the next few months. The British fund house may also give the investment mandate of 'Schroders India Fund' to Axis Mutual Fund in due course.